What’s Not Covered in a Homeowners Insurance Policy

Fran Majidi
February 13, 2019

Most people who buy a homeowners insurance policy do so because it’s required. When the news shows wildfires raging in southern California and flooding in the northeast, they assume they are protected in such circumstances. The reality is that a standard homeowners insurance policy does not cover you for every kind of peril that could prove to be disastrous to a home. We’ll first tell you what a homeowners insurance policy protects you against and then go over add-on homeowners coverages that you should seriously begin considering to ensure that you are covered in all kinds of perils. 

Are Storms Covered Under Homeowners Insurance?

Damage caused by natural disasters is sometimes covered by homeowners insurance and sometimes not. If there is a tornado and your home is damaged due to tornado winds, yes, you are covered. A homeowners insurance policy should be called a wind insurance policy because you’re covered for most wind-related claims. 

Does Homeowners Insurance Cover Mold?

A commonly asked question is “Is mold a covered peril?” Well, mold is not a peril. What caused it is the peril and this is what will determine a claim getting paid or not. Usually, any preventable leak or flood is not covered. Preventable conditions of high humidity are not covered either. Was the high humidity that caused the mold caused by a covered peril? On a homeowners policy some typically covered perils include the following:

  • Lightning
  • Fire
  • Theft
  • Vandalism
  • Falling objects
  • Weight of ice, snow, sleet
  • Frozen pipes

If your pipes froze (covered peril) and saturated your home when you were away and mold formed: You will likely be covered for this type of claim. However, if you left the water unnoticed for weeks and have a flood and mold you will not be covered. FYI: There’s a fine line between getting paid out and getting rejected. You could’ve prevented the mold if you were looking with the second example. Always remain vigilant of home repair needs and do inspections regularly. Leaks are easy to miss and you want your both your repairman and insurance company to be alerted sooner rather than later.

Does Homeowners Insurance Cover Roof Leaks?

It all depends on how that roof got the leak. If it was caused by terrible wind storms, you’re probably covered. But if your roof was 30 years old and in need of repair, your insurance will likely pay to replace it entirely (don’t bank on the new solar Tesla roof though). What you get paid out all depends on your insurance company, and the filing process can be challenging. Basically, your insurance company will either repair or replace the roof depending on whichever costs less.  

Flood Damage and Flood Insurance

Flash floods and snow accumulation followed by torrential rains can have awful consequences. Pipes often burst after freezing, and toilets get clogged so badly that they cause flooding. No one is immune to flood damage, but some people live in more vulnerable areas than others. Even though it may seem a flood would be covered by a basic insurance policy, it is not. You’ll need to buy a separate flood insurance policy and allow 30 days before you are covered. The following are some events that can cause flooding:

  • Hurricane
  • Burst pipes
  • Tidal waters
  • Snow and ice
  • Wind storms
  • Heavy rains
  • Broken dams
  • Urban drainage basins
  • Clogged sink
  • Forgetfulness
  • Earthquake

There are two types of flood insurance: building property coverage (includes plumbing, electrical, and built-in appliances, cabinets and more) and contents coverage (your personal belongings). The first covers the structural elements of your home while the latter covers your valuables and not-so-valuables. You’re best off buying both if you want your things (even food) to be covered after a sudden disaster. Otherwise, rebuilding and finding a place to stay in the interim will not be covered by insurance.

Many people who live in drought-ridden regions of California, Nevada and even Texas assume that they are safe from flooding when that is the farthest thing from the truth. In fact, California has recently seen floods and Texas survived Hurricane Harvey, which flooded homes and businesses in Houston.

It’s important to note that flooding is subsidized by the federal government with the National Flood Insurance Program (NFIP). People who live in flood zones are allowed to buy coverage without the 30-day waiting period. Everyone else must wait so it’s best to buy right away.

The average coverage on a flood insurance policy is $250,000/$100,000, for home/contents coverage with a $500 deductible. However, you can tailor your policy however way you see fit. Some people raise their limits on dwelling and do not cover their contents. The best thing to do is figure out how much it will cost to rebuild your home, which is the maximum you will be paid out. Most people wrongly assume that home insurance pays for the value of the house. That’s a wrong assumption. Home insurance covers rebuilding only, so make sure to keep receipts for all the work you do on your home.

Earthquake Insurance

Earthquake insurance can cover some losses and damage to your home and belongings after an earthquake. It is not included in a standard homeowners insurance policy. In California, insurance agents are required by law to explain that earthquake won’t be covered by a regular home policy. Earthquake is not included in policies outside of California either, so make sure you are buying a separate policy. In fact, the only thing you’d be covered for if you saw damage to your home after an earthquake would be fire damage, if the fire was caused by the earthquake. And that’s it. Without an earthquake insurance policy, you are on your own to pay for most of your rebuilding costs.

Renters in earthquake prone states sometimes buy earthquake insurance too, to cover the cost of repairing/replacing personal belongings. This coverage is not only for home and condo owners. With more storms happening each year, scientists predicts that there will be more earthquakes in this country in the next few years too. 

Like most home insurance policies, earthquake insurance does not pay out the value of a home in the event of a loss. It pays the amount required to rebuild the house. This three-part insurance policy includes dwelling coverage (the structure of the home), contents coverage (your belongings) and living expenses (you may need to stay in hotels during repairs/rebuilding).

Don’t wait to get covered after an earthquake strikes. Insurance companies stop selling earthquake insurance afterwards and once it’s offered again, premiums will be more expensive. It’s best just to add it onto your homeowners insurance as soon as possible.

Ordinance or Law Coverage

Without this type of coverage, you’re not going to be in much luck rebuilding an older home. What happens is that the city often overlooks city codes or ordinances until it comes time to rebuild that home after a natural disaster. If you own an older home that is not built to code, you’ll likely be shouldering a lot of the rebuilding costs after a catastrophe strikes your home. If this sounds like your situation, you may need to one day rebuild your entire electrical and heating system, the air conditioning and plumbing as well. You should really make sure to have the ordinance or law endorsement if you own something that will not meet city codes. It will cover much of the rebuilding cost.

Buying Insurance

Never buy without comparison shopping. That’s true for everything, especially homeowners insurance and all the add-ons mentioned above. To get connected with the right agent, contact SmartFinancial by visiting here or calling 855.214.2291.

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